RLJ Lodging Trust (the “Company”) (NYSE: RLJ) today announced that it has entered into a purchase and sale agreement to acquire upon completion the 231-room Hilton Cabana Miami Beach (the “Hotel”) for a fixed purchase price of $71.6 million, or approximately $310,000 per key.
The property opened as a hotel in the early 1950’s and was closed and gutted in 2007 in anticipation of a condominium conversion. The conversion did not materialize and the property went into foreclosure. In 2011, the current owners purchased the property to develop a new hotel, which they expect to complete and open in the fourth quarter of 2013 as a Hilton.
“We are thrilled to be entering the Miami Beach market. We see this acquisition as an excellent opportunity to enter a gateway market with multiple demand generators,” commented Thomas J. Baltimore, Jr., President and Chief Executive Officer. “Furthermore, the Hilton brand is underrepresented in this market which should provide for outsized performance from this hotel.”
According to Smith Travel Research (“STR”), there are currently two Hilton affiliated hotels that represent approximately 1% of the total rooms in the Miami Beach market. The Company expects that the Hotel’s association with a premium brand, such as Hilton, will yield strong demand from brand loyal guests seeking accommodations in the area.
The Hotel, which is located directly on the beach, will benefit from it location along the 6200 block of Collins Avenue in Miami Beach. Several of the buildings located along Collins Avenue and Ocean Drive are historic in nature; therefore, the market’s strict regulatory environment will make new development difficult.
The Miami market, which is one of the top-ranked lodging markets in the nation, garners one of the highest average daily rates and one of the highest revenue per available room (“RevPAR”) of any U.S. city and is surpassed only by New York, Oahu Island and San Francisco. In 2011, the Miami-Hialeah market posted a 14.1% RevPAR increase over 2010 and it continued to show strong signs of growth with a 7.9% RevPAR growth year-to-date through September 2012, as reported by STR.